Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing Framework
This study employs a mean semi-variance asset pricing framework to examine the influence of risk factors on stock returns of oil and gas companies. This study also examines how downside risk is priced in stock performance. The time-series estimations expose that market, size, momentum, oil, gas, and...
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2020-10-01
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| Series: | Mathematics |
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| Online Access: | https://www.mdpi.com/2227-7390/8/10/1732 |
| _version_ | 1797551445442035712 |
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| author | Mohammad Enamul Hoque Soo-Wah Low |
| author_facet | Mohammad Enamul Hoque Soo-Wah Low |
| author_sort | Mohammad Enamul Hoque |
| collection | DOAJ |
| description | This study employs a mean semi-variance asset pricing framework to examine the influence of risk factors on stock returns of oil and gas companies. This study also examines how downside risk is priced in stock performance. The time-series estimations expose that market, size, momentum, oil, gas, and exchange rate have significant impacts on oil and gas stock returns, but effects are heterogeneous depending on an individual stock. The two-stage cross-section estimations provide new insights about investors’ risk-return trade-off when facing downside risks. The results show that downside risk exposures to market, momentum, oil, and exchange rate factors are negatively priced in the Malaysian oil and gas stocks. This implies that investors are penalized for their downside exposure to these risk factors, and such inference is consistent with the risk preference explanation of prospect theory. Liquefied natural gas (LNG) is the only risk factor found to be positively priced in the returns of oil and gas stocks. Additionally, we find a negative relationship between LNG factor and total risk. This suggests that as the risk exposure to LNG increases, the total risk decreases, implying that the LNG risk factor is an idiosyncratic risk and not a systematic risk factor. Such interpretation is consistent with the correlation result, which shows no association between LNG and the market risk factor. |
| first_indexed | 2024-03-10T15:46:11Z |
| format | Article |
| id | doaj.art-dc73744bb45746d2affe968eab4586ce |
| institution | Directory Open Access Journal |
| issn | 2227-7390 |
| language | English |
| last_indexed | 2024-03-10T15:46:11Z |
| publishDate | 2020-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematics |
| spelling | doaj.art-dc73744bb45746d2affe968eab4586ce2023-11-20T16:30:03ZengMDPI AGMathematics2227-73902020-10-01810173210.3390/math8101732Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing FrameworkMohammad Enamul Hoque0Soo-Wah Low1Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, MalaysiaGraduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, MalaysiaThis study employs a mean semi-variance asset pricing framework to examine the influence of risk factors on stock returns of oil and gas companies. This study also examines how downside risk is priced in stock performance. The time-series estimations expose that market, size, momentum, oil, gas, and exchange rate have significant impacts on oil and gas stock returns, but effects are heterogeneous depending on an individual stock. The two-stage cross-section estimations provide new insights about investors’ risk-return trade-off when facing downside risks. The results show that downside risk exposures to market, momentum, oil, and exchange rate factors are negatively priced in the Malaysian oil and gas stocks. This implies that investors are penalized for their downside exposure to these risk factors, and such inference is consistent with the risk preference explanation of prospect theory. Liquefied natural gas (LNG) is the only risk factor found to be positively priced in the returns of oil and gas stocks. Additionally, we find a negative relationship between LNG factor and total risk. This suggests that as the risk exposure to LNG increases, the total risk decreases, implying that the LNG risk factor is an idiosyncratic risk and not a systematic risk factor. Such interpretation is consistent with the correlation result, which shows no association between LNG and the market risk factor.https://www.mdpi.com/2227-7390/8/10/1732asset pricingoil and gas risk factoroil and gas industryMalaysian stock marketmean semi-variance |
| spellingShingle | Mohammad Enamul Hoque Soo-Wah Low Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing Framework Mathematics asset pricing oil and gas risk factor oil and gas industry Malaysian stock market mean semi-variance |
| title | Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing Framework |
| title_full | Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing Framework |
| title_fullStr | Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing Framework |
| title_full_unstemmed | Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing Framework |
| title_short | Industry Risk Factors and Stock Returns of Malaysian Oil and Gas Industry: A New Look with Mean Semi-Variance Asset Pricing Framework |
| title_sort | industry risk factors and stock returns of malaysian oil and gas industry a new look with mean semi variance asset pricing framework |
| topic | asset pricing oil and gas risk factor oil and gas industry Malaysian stock market mean semi-variance |
| url | https://www.mdpi.com/2227-7390/8/10/1732 |
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